What is centralised hot water?

If you’re moving, and moving into a block with a fair few apartments, you may have been told that you don’t need to pay for water, but you do need to pay for ‘hot water’. So what on earth does this mean?! Hot water is the same as cold water, right? Well, yes, but you have to think about how your water gets heated – be it through gas or electricity. This is what you are paying for. In an apartment block, this is usually called ‘centralised hot water’ or ‘community hot water billing’. Find out what this means, and what it means for your budget, with Canstar Blue.

What is centralised hot water?

Centralised hot water, or community hot water billing, is the charge an apartment block incurs for heating water throughout the whole block. Apartments are then individually metered and charged accordingly. Think of it like an embedded electricity network, but just for hot water, or rather paying for the electricity or gas to heat the hot water. Usually centralised hot water is powered by natural gas, where having a gas hot water system in individual apartments is unfeasible.

Centralised hot water is usually reserved for fairly large apartment blocks, rather than townhouses or villas. So if you’ve moved in to a new apartment and been told you need to ‘pay for hot water’, this is effectively what it means. So why on earth would anyone have a separate bill for hot water?

How much does centralised hot water cost?

As like any other electricity or gas account, usually there is a usage charge and a supply charge. Most centralised systems use gas as the power source, and hence bills are presented in megajoules (MJ) – the unit of measurement for gas. Individual meters are then read in MJs. Costs vary from state to state, but generally gas is much cheaper than electricity, so count yourself lucky you don’t have an electric hot water system!

Due to the bulk purchasing power, centralised systems can deliver savings to the end user

Origin is the perennial provider of bulk hot water, with smaller provider ‘Savant Energy’ also on board. While there may be different suppliers on a case by case basis, Origin is one of the premier companies to offer such a service. However, you usually don’t get a choice of provider; either your apartment complex is with Origin or another provider such as Savant Energy. Hence, you probably cannot switch – this means you must set up an account with a particular provider.

Pros & Cons of Centralised Hot Water

Like embedded electricity networks, the fact that an apartment block buys ‘hot water’ in bulk means potential savings could be passed onto the individual resident. Rather than having residents individually choose their electricity or gas provider, centralising the system and then metering apartments can be convenient and cost efficient.

Convenience vs Choice

Those who like complete control over their bills may be turned off by such a ‘socialist’ ideal in that everyone bands together… or rather, are forced to band together. However, for most people having one less thing to worry about when moving in can be convenient. Having the apartment block get charged in bulk may also deliver savings that are then passed on to the consumer. Further to this, apartments may not have enough room for an individual hot water system, so having one for the whole complex may be space efficient too.

Of course, usually only one energy provider presides over the whole apartment complex, and they usually liaise with the property management, not individual tenants. This means that residents usually don’t get a choice in what provider to go with. Canstar Blue’s main message with energy providers is to ‘shop around’ and this goes against this very mantra. However, you will have to weigh up yourself whether you want choice or convenience.

Metering

One glaring problem that is more a general issue with energy metering in general is the fact that your hot water might be metered incorrectly. This may only be exacerbated if you’re in a large apartment block. Do you have a neighbour called Sarah who you know sings in the shower for an hour every night? There’s every chance that Sarah’s meter could be misread as yours, and the results may not be pretty. However, generally this can be rectified with a bit of communication with the property management group or body corporate.

Tenancy

If you’re entering a lease in an apartment complex, make sure the previous tenant has left everything squared away and also make sure you set up a new billing account with the provider in question. Centralised systems work smoothly, but can be disrupted by people ending leases and new leases being started. After all, you don’t want to be paying for the previous tenants’ hour-long showers, and the old tenant does not want to be billed for something they are no longer using!

How it benefits body corporate, owners or property managers

The main benefits for these three parties centre on convenience and risk aversion. Origin Energy has outlined quite a few potential benefits if you’re involved on the ‘other’ side of the tenancy agreement:

Automated billing: The provider usually manages the billing of hot water and individually sends out bills to each apartment. This saves the management group or body corporate divvying the total bill

Metering service: Each apartment is individually metered, making for easy usage calculations

Space-saving: In apartment blocks, space can be tight and have a centralised system means hot water can be supplied without each individual apartment having a hot water tank

Lower risk of leaks: By the same token, individual hot water tanks can be a headache if they spring a leak. Having one centralised hot water tank makes it easier to address any leakage problems

Is community hot water a good deal?

Community hot water, or centralised hot water systems, are obviously massively convenient, but the main pitfall mainly lies in not having the choice of provider. There are lots of electricity providers out there, which provide a lot of choice to the consumer. For those used to shopping around, moving into an apartment complex with centralised hot water may be a bit of a shock. For body corporate, community hot water is massively convenient as well but part of the deal lies in the tenant activating their account – not doing so could disrupt the smooth billing system. In any case, community hot water can be seen as a neutral thing – it’s neither good nor bad really, and you don’t have a choice anyway. If you’re adamant about not being part of one centralised system, you often don’t have a choice but to choose a different apartment to live in.

To our knowledge, all information in articles on the Canstar Blue website was correct at the time of publication. This information may have changed over time. Refer to the product fact sheet (or relevant similar documentation) before making any purchase decision. Canstar Blue's website terms and conditions apply.